AXIL Brands, Inc. Reports Third Quarter Fiscal Year 2024 Financial Results

Rhea-AI Summary

AXIL Brands, Inc. reported a 14.4% increase in net sales, reaching $6.47 million for the third quarter ended February 29, 2024. The company's gross profit margin was 71.5%, and operating expenses were 73.1% of net revenue. AXIL rebranded and uplisted to NYSE American, repurchasing a significant portion of preferred shares. The CEO highlighted the successful quarter and strategic goals for future growth.

Positive

• Net sales rose by 14.4% to $6.47 million in the third quarter.
• Gross profit margin was 71.5%, while operating expenses were 73.1% of net revenue.
• AXIL rebranded to AXIL Brands, Inc., uplisted to NYSE American, and repurchased a large portion of preferred shares.
• CEO Jeff Toghraie emphasized the company's achievements and growth strategy for the future.

Negative

• Operating expenses increased to 73.1% of net revenue in the third quarter.
• Loss before provision for income taxes was reported as $46,345.
• Gross profit margin decreased to 71.5% from 74.6% in the prior year period.

Insights

Financial Analyst

The reported increase in net sales by 14.4% to $6.47 million for AXIL Brands Inc. is indicative of the company's expanding market presence and suggests a positive customer response to their products. However, a decline in gross profit margin from 74.6% to 71.5% could signal rising costs or pricing pressures that may impact profitability if not managed effectively.

The operating expenses rising to 73.1% of net revenue is another area of concern, as it outpaces revenue growth and could erode earnings over time. This could be a red flag for investors seeking sustainable profit growth. The company's net income of $781,091, a significant increase from the previous year's $162,048, is encouraging but should be weighed against the overall financial health of the company, including the reported loss before tax provisions.

Market Research Analyst

AXIL's strategic move to uplist to the NYSE American Stock Exchange could be seen as a bid to increase visibility and credibility among investors, potentially leading to a broader shareholder base. The repurchase of Series A preferred shares, reducing outstanding shares by a substantial margin, is often a signal of management's confidence in the company's future performance and could be interpreted as a positive development for shareholder value.

However, investors should be cautious and consider the context of the share repurchase, including the company's long-term strategy and capital allocation efficiency. The impact on the stock's liquidity and market perception will also be key factors to monitor following such a significant reduction in share count.

Legal and Compliance Expert

AXIL's name change and rebranding efforts reflect a strategic pivot that could potentially open up new market opportunities and refresh the brand's image. From a compliance perspective, the uplisting and rebranding have been executed in accordance with regulatory requirements, which is important for maintaining investor trust.

Moreover, the share repurchase transaction should be scrutinized for adherence to securities laws and regulations to ensure transparency and fairness in the process. The benefit provision from income taxes reported suggests a favorable tax position for the company, which could have implications for future earnings and cash flow.

LOS ANGELES, April 10, 2024 (GLOBE NEWSWIRE) -- AXIL Brands, Inc. (“AXIL,” “we,” “us,” “our,” or the “Company”) (NYSE American: AXIL), an emerging global consumer products company for AXIL® hearing protection and enhancement products and Reviv3® hair and skin care products, today announced financial and operational results for the third quarter ended February 29, 2024.

Highlights for the Quarter Ended February 29, 2024

• Net Sales (revenue) increased 14.4% to approximately $6.47 million in the third quarter, as compared to the prior year period.
• Gross profit as a percentage of sales was 71.5% in the third quarter, as compared to 74.6% for the prior year period.
• Operating expenses as a percentage of net revenue were 73.1% in the third quarter, compared to 70.7% for the prior year period.
• Loss before provision for income taxes was $46,345 and benefit provision from income taxes was $827,436 in the third quarter.
• Reported third quarter net income of $781,091 or $0.04 on a fully diluted basis compared to $162,048 or $0.01 for the prior year period.

Key Updates Since AXIL’s Last Quarterly Earnings Release

• As part of our rebranding the Company changed its name to AXIL Brands, Inc. and stock ticker symbol to “AXIL”.
• Completed uplist to the NYSE American Stock Exchange.
• In March 2024, AXIL repurchased 207,748,250 shares of Series A preferred stock equivalent, in the aggregate, to 10,387,413 shares of the Company’s common stock on an as converted basis resulting in the reduction of approximately 83% of the Company’s outstanding Series A preferred shares or approximately 55% of the Company’s total outstanding shares on a fully diluted basis.
  

“We are extremely pleased with our business performance and the significant objectives achieved during this quarter. Our successful listing on the NYSE American stock exchange and recent repurchase of our Series A preferred shares enhances our ability to execute our enterprise growth strategy and unlock value for our shareholders.” Commented Jeff Toghraie, Chairman and Chief Executive Officer. “Looking ahead, we remain committed to expansion into new markets, optimizing operations and creating sustainable long term growth.”

AXIL BRANDS, INC. AND SUBSIDIARY CONSOLIDATED BALANCE SHEETS
		February 29, 2024				May 31, 2023
		(Unaudited)
ASSETS
CURRENT ASSETS:
Cash		$	4,887,567			$	4,832,682
Accounts receivable, net			719,504				417,016
Inventory, net			3,443,293				1,311,864
Due from related party			18,536				—
Prepaid expenses and other current assets			656,328				801,360
Deferred tax asset			234,161				—
Total Current Assets			9,959,389				7,362,922
OTHER ASSETS:
Property and equipment, net			212,146				157,463
Intangible assets, net			324,549				382,674
Right of use asset			53,224				101,845
Other assets			12,195				12,195
Goodwill			2,152,215				2,152,215
Total Other Assets			2,754,329				2,806,392
TOTAL ASSETS		$	12,713,718			$	10,169,314
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable		$	1,890,844			$	908,606
Customer deposits			37,140				183,688
Equipment payable, current			—				2,200
Contract liabilities, current			880,450				827,106
Notes payable, current			3,310				172,588
Due to related party			—				158,072
Lease Liability, current			54,322				65,824
Income Tax Liability			68,019				230,913
Other current liabilities			307,794				305,664
Total Current Liabilities			3,241,879				2,854,661
LONG TERM LIABILITIES:
Notes payable, long term			143,840				—
Lease liability, long term			—				36,752
Contract liabilities, long term			541,108				605,942
Total Long Term Liabilities			684,948				642,694
Total Liabilities			3,926,827				3,497,355
Commitments and contingencies (see Note 11)			—				—
STOCKHOLDERS' EQUITY:
Preferred stock, $0.0001 par value; 300,000,000 shares authorized; 250,000,000 shares issued and outstanding as of February 29, 2024 and May 31, 2023, respectively			25,000				25,000
Common stock, $0.0001 par value: 450,000,000 shares authorized; 5,878,939 and 5,863,939 shares issued, and outstanding as of February 29, 2024 and May 31, 2023, respectively			588				586
Additional paid-in capital			10,274,677				10,113,365
Accumulated deficit			(1,513,374	)			(3,466,992	)
Total Stockholders' Equity			8,786,891				6,671,959
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY		$	12,713,718			$	10,169,314

AXIL BRANDS, INC. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
		For the Three Months Ended								For the Nine Months Ended
		February 29,				February 28,				February 29,				February 28,
		2024				2023				2024				2023
Sales, net		$	6,469,343			$	5,656,461			$	20,997,289			$	16,625,818
Cost of sales			1,845,017				1,437,976				5,467,458				4,085,645
							25	%			26	%			25	%
Gross profit			4,624,326				4,218,485				15,529,831				12,540,173
							75	%			74.0	%			75	%
OPERATING EXPENSES:
Sales and marketing			3,398,949				3,173,383				10,278,570				8,250,257
Compensation and related taxes			228,869				360,802				713,504				1,214,213
Professional and consulting			552,922				216,687				1,471,025				832,958
General and administrative			547,465				251,025				1,732,942				841,761
Total Operating Expenses			4,728,205				4,001,897				14,196,041				11,139,189
							71	%			68	%			67	%
(LOSS) INCOME FROM OPERATIONS			(103,879	)			216,588				1,333,790				1,400,984
OTHER INCOME (EXPENSE):
Gain on debt settlement			—				—				79,182				50,500
Other income			6,114				—				19,138				—
Interest income			52,915				6,721				129,233				13,262
Interest expense and other finance charges			(1,495	)			(1,714	)			(4,779	)			(4,927	)
Other Income, Net			57,534				5,007				222,774				58,835
(LOSS) INCOME BEFORE PROVISION FOR INCOME TAXES			(46,345	)			221,595				1,556,564				1,459,819
(Benefit) Provision for income taxes			(827,436	)			59,547				(397,054	)			395,344
NET INCOME		$	781,091			$	162,048			$	1,953,618			$	1,064,475
NET INCOME PER COMMON SHARE:
Basic		$	0.13			$	0.03			$	0.33			$	0.19
Diluted		$	0.04			$	0.01			$	0.11			$	0.06
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING:
Basic			5,863,939				5,849,501				5,863,939				5,574,312
Diluted			18,576,914				18,629,501				18,569,140				17,497,737

AXIL BRANDS, INC. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (UNAUDITED)
For the nine months ended February 29, 2024
										Common Stock								Additional								Total
		Preferred Stock								Issued/Issuable								Paid-in				Accumulated				Stockholders'
		Shares				Amount				Shares				Amount				Capital				Deficit				Equity
Balance, May 31, 2023			250,000,000			$	25,000				5,863,939			$	586			$	10,113,365			$	(3,466,992	)		$	6,671,959
Stock options expense			—				—				—				—				153,320				—				153,320
Restricted stock awards			—				—				15,000				2				7,992				—				7,994
Net income			—				—				—				—				—				1,953,618				1,953,618
Balance, February 29, 2024			250,000,000			$	25,000				5,878,939			$	588			$	10,274,677			$	(1,513,374	)		$	8,786,891
For the three months ended February 29, 2024
										Common Stock								Additional								Total
		Preferred Stock								Issued/Issuable								Paid-in				Accumulated				Stockholders'
		Shares				Amount				Shares				Amount				Capital				Deficit				Equity
Balance, November 30, 2023			250,000,000			$	25,000				5,863,939			$	586			$	10,215,580			$	(2,294,465	)		$	7,946,701
Stock options expense			—				—				—				—				51,105				—				51,105
Restricted stock awards			—				—				15,000				2				7,992				—				7,994
Net income			—				—				—				—				—				781,091				781,091
Balance, February 29, 2024			250,000,000			$	25,000				5,878,939			$	588			$	10,274,677			$	(1,513,374	)		$	8,786,891
For the nine months ended February 28, 2023
										Common Stock								Additional								Total
		Preferred Stock								Issued/Issuable								Paid-in				Accumulated				Stockholders'
		Shares				Amount				Shares				Amount				Capital				Deficit				Equity
Balance, May 31, 2022			—			$	—				2,107,385			$	211			$	5,476,068			$	(5,291,567	)		$	184,712
Shares issued for acquisition of business			250,000,000				25,000				3,659,195				366				3,982,115				—				4,007,481
Stock options expense			—				—				—				—				155,067				—				155,067
Shares to be issued for cash			—				—				97,359				9				447,840				—				447,849
Net income			—				—				—				—				—				1,064,475				1,064,475
Balance, February 28, 2023			250,000,000			$	25,000				5,863,939			$	586			$	10,061,090			$	(4,227,092	)		$	5,859,584
For the three months ended February 28, 2023
										Common Stock								Additional								Total
		Preferred Stock								Issued/Issuable								Paid-in				Accumulated				Stockholders'
		Shares				Amount				Shares				Amount				Capital				Deficit				Equity
Balance, November 30, 2022			250,000,000			$	25,000				5,837,899			$	583			$	9,910,371			$	(4,389,140	)		$	5,546,814
Stock options expense			—				—				—				—				30,922				—				30,922
Shares to be issued for cash			—				—				26,040				3				119,797				—				119,800
Net income			—				—				—				—				—				162,048				162,048
Balance, February 28, 2023			250,000,000			$	25,000				5,863,939			$	586			$	10,061,090			$	(4,227,092	)		$	5,859,584

AXIL BRANDS, INC. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
		For the Nine Months Ended
		February 29,				February 28,
		2024				2023
CASH FLOWS FROM OPERATING ACTIVITIES
Net income		$	1,953,618			$	1,064,475
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization			83,634				66,944
Bad debts			143,395				13,782
Stock based compensation			161,314				155,067
Gain on settlement			(79,182	)			(50,500	)
Provision (benefit) for deferred income taxes			(397,054	)			—
Change in operating assets and liabilities:
Accounts receivable			(445,883	)			(134,622	)
Inventory			(2,131,429	)			297,213
Prepaid expenses and other current assets			145,032				(296,787	)
Deposits			—				(3,810	)
Accounts payable and accrued expenses			1,061,420				87,879
Other current liabilities			(144,052	)			860,973
Contract liabilities			(11,490	)			259,362
NET CASH PROVIDED BY OPERATING ACTIVITIES			339,323				2,319,976
CASH FLOWS FROM INVESTING ACTIVITIES
Cash acquired on business acquisition			—				1,066,414
Purchases of property and equipment			(80,192	)			(65,650	)
NET CASH (USED IN) PROVIDED BY INVESTING ACTIVITIES			(80,192	)			1,000,764
CASH FLOWS FROM FINANCING ACTIVITIES
Cash raised for common stock to be issued			—				447,850
Repayment of equipment financing			(2,200	)			(2,200	)
Repayment of note payable			(25,438	)			(22,797	)
Advances (repayments) to/from a related party			(176,608	)			63,008
NET CASH (USED IN) PROVIDED BY FINANCING ACTIVITIES			(204,246	)			485,861
NET INCREASE IN CASH			54,885				3,806,601
CASH - Beginning of period			4,832,682				373,731
CASH - End of period		$	4,887,567			$	4,180,332
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest		$	4,681			$	3,173
Income taxes		$	—			$	—
SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:
Stock issued for asset purchase agreement		$	—			$	4,007,480
Right of use assets recognized as lease liability		$	—			$	131,970
Tangible assets (excluding cash) acquired in business combination		$	—			$	1,740,729
Intangible assets acquired in business combination		$	—			$	456,945
Goodwill acquired in business combination		$	—			$	2,152,215
Liabilities assumed in business combination		$	—			$	1,408,823

About AXIL

AXIL (NYSE American) is an emerging global e-commerce consumer products company. The Company is a manufacturer and marketer of premium hearing enhancement and protection products, including ear plugs, earmuffs, and ear buds, under the AXIL® brand and premium hair and skincare products under its in-house Reviv3 Procare brand - selling products in the United States, Canada, the European Union and throughout Asia. To learn more, please visit the Company's website at www.reviv3.com and, for the AXIL® brand, visit www.axilbrands.com.

Forward-Looking Statements

This press release contains a number of forward-looking statements within the meaning of the federal securities laws. The use of words such as “believe,” “expect,” “continue,” “will,” “prepare,” “should,” and ”focus,” among others, generally identify forward-looking statements. These forward-looking statements are based on currently available information, and management’s beliefs, projections, and current expectations, and are subject to a number of significant risks and uncertainties, many of which are beyond management’s control and may cause the Company’s results, performance or achievements to differ materially from any future results, performance or achievements expressed or implied by these forward- looking statements. Factors that could cause actual results to differ materially from those in the forward-looking statements include, among other things: (i) the Company’s ability to grow net sales as anticipated and perform in accordance with guidance; (ii) our ability to generate sufficient revenue to support the Company’s operations and to raise additional funds or obtain other forms of financing as needed on acceptable terms, or at all; (iii) potential difficulties or delays the Company may experience in implementing its cost savings and efficiency initiatives, including integrating the AXIL® brand; (iv) the Company’s ability to compete effectively with other hair and skincare companies and hearing enhancement and protection companies; (v) the concentration of the Company’s customers, potentially increasing the negative impact to the Company by changing purchasing or selling patterns; (vi) changes in laws or regulations in the United States and/or in other major markets, such as China, in which the Company operates, including, without limitation, with respect to taxes, tariffs, trade policies or product safety, which may increase the Company product costs and other costs of doing business, and reduce the Company’s earnings; and (vii) the impact of unstable market and general economic conditions on the Company’s business, financial condition and stock price, including inflationary cost pressures, the possibility of an economic recession and other macroeconomic factors, geopolitical events, and uncertainty, decreased discretionary consumer spending, supply chain disruptions and constraints, labor shortages, ongoing economic disruption, including the effects of the Ukraine-Russia conflict and the Israel-Hamas conflict, and other downturns in the business cycle or the economy. There can be no assurance as to any of these matters, and potential investors are urged to consider these factors carefully in evaluating the forward-looking statements. Other important factors that may cause actual results to differ materially from those expressed in the forward-looking statements are discussed in the Company’s filings with the U.S. Securities and Exchange Commission. These forward-looking statements speak only as of the date hereof. Except as required by law, the Company does not assume any obligation to update or revise these forward-looking statements for any reason, even if new information becomes available in the future.

Investor Relations:
AXIL Investor Relations Team
(888) 638-8883
investors@axilbrands.com

FAQ

What was the percentage increase in net sales for AXIL Brands, Inc. in the third quarter?

AXIL Brands, Inc. reported a 14.4% increase in net sales, reaching $6.47 million for the third quarter ended February 29, 2024.

What is the gross profit margin for AXIL Brands, Inc. in the third quarter?

The company's gross profit margin was 71.5% in the third quarter, compared to 74.6% in the prior year period.

What strategic changes did AXIL Brands, Inc. make recently?

AXIL rebranded to AXIL Brands, Inc., uplisted to NYSE American, and repurchased a significant portion of preferred shares.

Who commented on AXIL Brands, Inc.'s recent achievements and growth strategy?

CEO Jeff Toghraie highlighted the successful quarter and strategic goals for future growth.